House of Representatives Committees

Chapter 5 Copyright

Background

5.1This and the following chapter will examine in detail the two main
subjects of ACTA: copyright and intellectual property (IP).

5.2The general terms of copyright were established by the Berne Convention
for the Protection of Literary and Artistic Works (The Convention). The
Convention implemented an international structure of protection for literary
works, works of art, official texts, collections, and works of industrial or
applied design.[1]

5.3The terms of copyright in the Convention have been expanded through
successive agreement, most significantly through the TRIPS Agreement which
extended the scope of copyright to include, for example, computer programs and
databases, and music recordings.[2]

5.4ACTA, which is intended to be read in conjunction with the TRIPS
Agreement, focuses on the enforcement of recognised rights. It provides for:

nCivil enforcement,
permitting rights holders to pursue alleged breaches of rights themselves.
Civil enforcement provides a number of remedies for rights holders, including
the ability to request the seizure of alleged rights infringing goods, and the
ability to seek financial remedies for alleged breaches of rights;[3]

nBorder measures,
permitting signatory states to seize alleged rights infringing goods at the
border;[4] and

nCriminal enforcement
through the criminalisation of rights infringement and aiding and abetting
rights infringement.[5]

5.5Participants to the inquiry raised a number of issues in relation to the
rights enforcement regime contained in ACTA. These included:

nthe proportionality
of the criminal penalties;

nthe conscious
decision not to include TRIPS provisions relating to the protection of
individual rights;

nthe treatment of
secondary liability in ACTA;

nthe definition of
‘commercial scale’ in relation to offences in ACTA; and

nthe construction of
civil remedies in ACTA.

Proportionality of criminal offences

5.6ACTA will oblige parties to it to implement criminal procedures and
penalties for the following activities:

ncases of wilful
trademark counterfeiting or copyright or related rights piracy on a commercial
scale; and

ncases of wilful
importation and domestic use, in the course of trade and on a commercial scale,
of labels or packaging to which a mark has been applied without authorization
and which are intended to be used in the course of trade on goods or in
relation to services which are identical to goods or services for which such
trademark is registered.[6]

5.7Parties to ACTA are also required to adopt such measures as may be
necessary, consistent with its legal principles, to establish the liability,
which may be criminal, of legal persons for the offences specified in this
Article for which the Party provides criminal procedures and penalties.[7]

5.8ACTA further requires that, for offences specified in paragraphs 1, 2,
and 4 of Article 23, each Party shall provide penalties that include
imprisonment as well as monetary fines sufficiently high to provide a deterrent
to future acts of infringement, consistent with the level of penalties applied
for crimes of a corresponding gravity.[8]

5.9ACTA’s provisions are significantly more prescriptive than the preceding
TRIPS Agreement, which did not require the criminalisation of copyright
infringement.[9]

5.10A number of participants in the inquiry argued that the significantly
more prescriptive approach adopted in ACTA is disproportionate to the scale of copyright
infringement.[10]

5.11There are a number of grounds for making this argument. The first,
dealt with in a previous chapter, is that there is no evidentiary proof of the
scope of the problem.[11]

5.12The second argument relates to the value of the alleged copyright
infringing goods. Dr Hazel Moir argues that the penalty provisions have been
drafted on the apparent assumption that the value of the copyright infringing
goods is equivalent to the value of the copyrighted goods, and she argues
against the assumption.[12]

5.13According to Dr Moir, it is virtually impossible to determine the
quantity in the authorised market which might have been sold in the absence of
a secondary market for the counterfeit goods. The profit margin in secondary
markets is considerably lower than the profit margin in authorised markets. The
appropriate presumption in determining the degree to which copyright
infringement is criminalised is the value of the copyright infringing goods in
the secondary market.[13]

5.14A related but slightly different concern is the effect on the public of
over‑criminalisation of an act. Ms Kimberlee Weatherall speculates that criminalising
minor acts tends to facilitate overcharging of individuals and lessens peoples’
respect for the law, as well as imposing a chilling effect on business.

5.15Ms Weatherall expresses a concern that the effects of over
criminalisation will affect areas like copyright where the law is complex and
infringement may not be clear-cut.[14]

5.16A further criticism of ACTA’s criminal enforcement provisions is that
they do not comply with the standards set out in the Washington Declaration
on Intellectual Property and the Public Interest (the Washington
Declaration).

5.17The Washington Declaration is a non-government declaration the intention
of which is to implement IP standards such as restraint in enforcement, open
access, and development priorities, that the drafters hope will help change the
course of IP policymaking. The Washington Declaration clearly states that it
is intended to counter the perceived shift in the balance of copyright and IP
towards protection.[15]

5.18The points of difference between ACTA and the Washington Declaration
allegedly include:

nThat ACTA does not ensure
that legal penalties, processes, and remedies are reasonable and proportional
to the acts of infringement they target, and do not include restrictions on
access to essential goods and services, including access to the Internet or to
needed medicines and learning materials;

nACTA fails to promote
proportional approaches to enforcement that avoid excessively punitive
approaches to enforcement, such as disproportionate statutory damages; undue expansion
of criminal and third party liability; and dramatic increases in authority to
enjoin, seize and destroy goods without adequate procedural safeguards;

nACTA does not ensure
that countries retain the rights to implement flexibilities to enforcement measures
and to make independent decisions about the prioritization of law enforcement
resources to promote public interests;

nACTA fails to ensure
that agreements and protocols between individuals, intermediaries, rights
holders, technology providers, and governments relating to enforcement on the
Internet are transparent, fair and clear; and

5.19In the Committee’s view, criticisms of ACTA based on the Washington Declaration
are part of a broader debate about the philosophical underpinnings of the
copyright system.

5.20It is also worth noting that Australian criminal penalties for copyright
infringement already comply with ACTA.

5.21The ACTA NIA does not contain any empirical evidence that the criminal
penalties contained in ACTA are proportionate. This makes it difficult for the
Committee to make a judgement as to the veracity of criticisms of the
proportionality of the criminal penalties.

5.22In a similar vein to the issues associated with the statistics’ evidence
for counterfeiting and fraud, the Committee believes that in circumstances when
the international framework is proposed to be changed through a significant
increase in the scope of criminal penalties, the NIA should contain empirical
evidence to support such a change.

Recommendation 3

That, in circumstances where a treaty includes the
introduction of new criminal penalties, the treaty’s National Interest
Analysis justify the proposed new penalties.

TRIPS protections for individual rights

5.23ACTA contains very little in the way of protections for individuals who
are suspected of infringing copyright. The protections relate to certain types
of private information as described in Article 4, and a protection relating to
small amounts of counterfeit items in personal luggage contained in article fourteen
(although the definition of small amounts for this purpose is not clear).

5.24The approach to protections for individuals in ACTA is significantly
different from the approach adopted in the TRIPS Agreement. The TRIPS
Agreement specifically requires enforcement procedures to be fair and
equitable.[17]

5.26Ambiguity arises from the frequent occasions on which the ACTA affirms
obligations for parties to enforce copyright and IP protections without reference
to safeguards for defendants which all ACTA parties are bound to apply as a
result of TRIPS.[19]

5.27This has led to a quite common view that ACTA removes the TRIPS safeguards,
although that is an incorrect reading.[20] The protections
contained in the TRIPS Agreement are given force in ACTA as a result of Article
1, which states:

Nothing in this Agreement shall derogate from any obligation
of a Party with respect to any other Party under existing agreements, including
the TRIPS Agreement.

5.28Nevertheless, it appears to be of some consequence that, while ACTA is
significantly more stringent and rights holder friendly than the TRIPS
Agreement, TRIPS contains statements of fundamental balance and protections for
users that are absent from ACTA.[21]

5.29For example, ACTA neglects to include applicable exceptions and
limitations to IP rights to facilitate access to knowledge, culture,
information and research. It also does not state TRIPS safeguards on a number
of IP remedies and provides no concrete protection for interests such as
individual privacy or commercial confidentiality or the rights of defendants to
legal action.

5.30The Australian Digital Alliance and the Australian Libraries Copyright
Committee argue that the failure to include the TRIPS Agreement protections
emphasises primacy of the rights holder and deepens the imbalance between
appropriate protections for creators and the public interest in flexible and
fair use of content.[22]

5.31While it is clear to people who regularly deal with copyright and IP
that the TRIPS Agreement protections are to be read into ACTA, the Committee is
of the view that a statement clearly identifying the TRIPS Agreement protections
and how they will function in conjunction with the enforcement procedures
contained in ACTA will be beneficial for the public acceptance of ACTA.

5.32The Committee therefore recommends the Australian Government make a
public statement of policy intent specifying the individual protections that
will be read into ACTA from the TRIPS Agreement and how they will apply in
relation to the enforcement provisions contained in ACTA.

Recommendation 4

That the Australian Government publishes the individual
protections that will be read into the Anti-Counterfeiting Trade Agreement (ACTA) from the Trade-Related Aspects of Intellectual Property RightsAgreement and how the protections will apply in relation to the enforcement provisions
contained in ACTA.

Aiding and abetting

5.33ACTA will specifically require the creation of an offence for ‘aiding
and abetting’ a copyright infringement.[23] The aiding and abetting
provisions will be dealt with in the following way:

ncourts must have the
authority to order a third party to prevent infringing goods from entering into
the channels of commerce (Article 8.1);

ncourts must have the
authority to order provisional measures, where appropriate, against a third
party ‘to prevent an infringement of any intellectual property right from
occurring, and in particular, to prevent goods that involve the infringement of
an intellectual property right from entering into the channels of commerce’
(Article 12.1);

na vague provision on
digital enforcement requiring that enforcement procedures shall apply to
infringement of copyright or related rights over digital networks, which may
include the unlawful use of means of widespread distribution for infringing
purposes (Article 27.2).[24][25]

5.34Prior to ACTA, secondary liability has been a rare provision in
international agreements related to copyright and IP. Laws relating to
secondary liability have been left to domestic legal developments, and vary
significantly between countries.[26]

5.35Aiding and abetting in IP is an area of considerable controversy at
present, both within Australia and internationally.[27]
ACTA does not contain a definition of aiding and abetting.

5.36Interpretations of what constitutes aiding and abetting are consequently
very wide. For example, making third parties responsible for IP infringements
actually committed by others has been read very expansively in IP law.[28]
The interpretation of aiding and abetting may include, for example, any site
incidentally linking to – or mentioning – a website with infringing content.[29]

5.37In an Australian context, ACTA is troubling in that it seems to suggest
that injunctions to act should be available against intermediaries who would
not themselves be liable for infringement or for authorising infringement.
According to Ms Weatherall, this is not generally in accord with Australian
law, and would require imposing costs on parties which are themselves entirely
innocent of infringement.[30]

5.38Aiding and abetting should therefore be considered carefully and
strongly justified.[31]

5.39Ms Weatherall recommends that, to provide some clarity to the
interpretation of aiding and abetting, the Committee should seek a positive
statement from the government of its understanding of the ACTA requirements.[32]
The Committee agrees with Ms Weatherall that such a statement would be a useful
way of bringing clarity to the aiding and abetting provisions.

Recommendation 5

That the Australian Government clarify and publish the meaning
of “aiding and abetting” as it applies to the Anti-Counterfeiting Trade
Agreement.

Commercial scale

5.40The definition of a commercial scale in relation to copyright and IP
infringement is significant because that definition determines the point at
which an alleged infringer of copyright or IP becomes liable for criminal
penalties.

5.41Unlike ACTA, the TRIPS Agreement leaves commercial scale as a matter for
individual countries to define, according to the state of their domestic
market. [33]

5.42Commercial scale is defined in ACTA as:

...acts carried out on a commercial scale include at least
those carried out as commercial activities for direct or indirect economic or
commercial advantage.[34]

5.43Signatories to ACTA are required to:

...provide for criminal procedures and penalties to be
applied at least in cases of wilful trademark counterfeiting or copyright or
related rights piracy on a commercial scale.[35]

5.44This provision was the subject of a number of concerns expressed during
the inquiry. It was argued that that the definition does not adequately
differentiate between commercial and non-commercial activities because ACTA
contains no adequate definition or example of direct or indirect economic or
commercial advantage. Consequently, no appropriate safeguards or methodologies
to differentiate between commercial and non-commercial infringement are
included.[36]

5.45Dr Moir pointed out that the definition effectively defines commercial
as being any activity that provides economic advantage, with no mention of what
constitutes scale.[37]

5.46Ms Weatherall expressed a concern that the ACTA definition applies to
single acts.[38] This is a point also
made by the Australian Digital Alliance and Australian Libraries Copyright
Committee. Consequently, it is possible to infringe the commercial scale
provisions by doing something as simple as forwarding a single email without
permission of the copyright owner (ie the writer of the email) in a business
context. [39]

5.47Once again, the Committee is faced with a situation in which a provision
of ACTA is generating confusion and a proliferation of definitional problems.
The issue for the Committee is that the mix of interpretations applied to the
term commercial scale opens the possibility of an interpretation contrary to
the Australian Government’s intended interpretation being adopted by a court,
or Australia’s international trading partners.

5.48The Committee’s recommendation here follows on from those above. It is
important in such a contested field of definitions that the Australian
Government’s preferred definition be stated clearly.

Recommendation 6

That the Australian Government clarify and publish the meaning
of “commercial scale” as it applies to the Anti-Counterfeiting Trade
Agreement.

Civil penalties and compensation

5.49‘Adequate’ compensation for non-commercial infringements is not
universally agreed upon. As the United Kingdom Intellectual Property Office (UK
IPO) demonstrates:

Subtle differences in methodology can lead to differences of
outcome. For example, the impact of [intellectual property] infringement can be
assumed to be the sum of the impact each individual infringer has. Many studies
however calculate impacts on the basis of multiplying the mean number of
infringers by the mean impact of infringement; that represents an assumption
about the population of infringers which may, in fact, not be valid in all
cases, and where it is, it can bias the results up or down depending on
modelling choices.[40]

5.50The Committee was told that the UK IPO tested various methodologies and
found that the results varied wildly, ranging from £6 to £451 per offence.
Therefore, ‘it is also implausible to expect a rights holder to submit an
appropriate "legitimate measure of value" for copyright infringement,
as their methodologies have been shown to produce figures that would not be
arrived at by using other equally legitimate methods’.[41]
Furthermore:

...the IPO acknowledges that infringers, at least on a
non-commercial level, could ascribe ‘essentially no value’ to the goods they
infringe. In the digital environment, the ability to duplicate works at near to
no cost means that the market price is not determined by what the retailer or
rights holder asks for it, but what the consumer is willing to pay for it. If
infringing consumers had no intention of purchasing the work, then they cannot
feasibly be responsible for ‘lost profits,’ and ‘presumptions for determining
the amount of damages sufficient to compensate the right holder for the harm
caused’ would rely on proving malicious intent – that is, proof of the
intention of deliberate denial of profit for self-gain.[42]

Lack of definitions of fundamental principles

Definition of piracy

...any goods which are copies made without the consent of the
right holder or person duly authorized by the right holder in the country of
production and which are made directly or indirectly from an article where the
making of that copy would have constituted an infringement of a copyright or a
related right under the law of the country in which the procedures set forth in
Chapter II (Legal Framework for Enforcement of Intellectual Property Rights)
are invoked.[43]

... dealing with civil remedies, criminal offences, border
measures, enforcement of intellectual property rights in a digital environment,
technological protection measures, and electronic rights management
information...The National Interest Analysis asserts, very controversially and
without evidence, that such obligations ‘constitute best practice forms of IP
enforcement.’ The provisions are hardly that.[44]

Definition of counterfeiting

5.53Counterfeiting is broadly and inclusively defined under the proposed
international agreement. The definition provides that ‘counterfeit trademark
goods’ means:

... any goods, including packaging, bearing without
authorization a trademark which is identical to the trademark validly
registered in respect of such goods, or which cannot be distinguished in its
essential aspects from such a trademark, and which thereby infringes the rights
of the owner of the trademark in question under the law of the country in which
the procedures set forth in Chapter II (Legal Framework for Enforcement of
Intellectual Property Rights) are invoked.[45]

5.54The agreement emphasises that ‘that the proliferation of counterfeit and
pirated goods, as well as of services that distribute infringing material,
undermines legitimate trade and sustainable development of the world economy,
causes significant financial losses for right holders and for legitimate
businesses, and, in some cases, provides a source of revenue for organized
crime and otherwise poses risks to the public’.[46]

Lack of flexibility in specific provisions

5.55It is more appropriate, therefore, that obligations be adopted at a high
level of generality so as to allow individual countries to adapt rules to local
circumstances and local institutions. Some parts of ACTA are drafted in a
detailed way that leaves little flexibility for contracting parties: see, for
example, Article 18 (security) or Article 25 (seizure, forfeiture and
destruction).[47]

No statement of TRIPS protections for alleged infringers

5.56Further ambiguity arises from the frequent occasions on which ACTA
affirms obligations for parties without including safeguards for defendants
which all ACTA parties are bound to apply as a result of TRIPS. This has led
to a quite common view that ACTA removes the TRIPS safeguards, although that
appears to be an incorrect reading.[48]

5.57ACTA is significantly more stringent and rights holder friendly than the
TRIPS Agreement, to which Australia is a signatory. Despite concerns raised by
the Productivity Commission on Australia’s ratification of TRIPS, TRIPS
contains statements of fundamental balance and protections for users that are
simply absent from ACTA.[49]

5.58ACTA neglects to consider appropriate exceptions and limitations to IP
rights to facilitate access to knowledge, culture, information and research; it
also removes TRIPS safeguards on a number of IP remedies and provides no
concrete protection for interests such as individual privacy or commercial
confidentiality or the rights of defendants to legal action. Its emphasis on
the rights holder risks creating an imbalance between appropriate protections
for creators and the public interest in flexible and fair use of content.[50]